Heads of Terms Mistakes That Cost Commercial Tenants

1. No fit-out cost plan before HoT

Tenants routinely agree rent-free contribution based on broker estimates. Real CAT B quote lands 3 months later at +40%. The lease is already signed.

Fix: commission fit-out cost plan pre-HoT. £2–5k. Saves six figures.

2. Accepting CAT A specification sight-unseen

"The building is delivered CAT A" — but what's in that CAT A? Carpet grade, lighting fittings, ceiling tile — all affect tenant CAT B cost.

Fix: request CAT A specification drawings at HoT. Include in HoT.

3. No service charge cap

Uncapped service charge can rise 15%+ annually. Over 10 years, unbounded exposure.

Fix: RPI-linked cap on HoT, with specific exclusions.

4. Missing break clause

10-year lease with no break locks you in entirely. Business circumstances change.

Fix: tenant-option break at year 5 on any lease over 5 years.

5. Break conditions too onerous

Break conditional on 'full compliance with all covenants' — any minor breach invalidates break.

Fix: limit conditions to material breach only.

6. Unrecorded rent-free clawback

Some leases require repayment of unexpired rent-free on early break. Tenant surprised.

Fix: explicitly address in HoT.

7. Alterations clause too restrictive

'Absolute prohibition on alterations' means no CAT B at all. Cosmetic only.

Fix: qualified — 'consent not to be unreasonably withheld'.

8. Rent review upward-only

Upward-only rent review (traditional) means tenant exposed to market-rent uplift but not downside. Falling markets don't cut your rent.

Fix: negotiate collar-and-cap rent review (e.g. RPI +/- 2%).

9. No schedule of condition

Addressed elsewhere: Schedule of Condition guide. Typical £30k–£300k+ dilapidations liability created by omission.

10. Rushed legal review

"Get it signed this week." Lease needs 2+ weeks solicitor review to surface issues like assignment restrictions, repairing obligations, section 25 protections, insurance clauses.

Fix: build 2–3 week legal review into the HoT timetable.

What we do

Pre-HoT fit-out cost planning on request. Full Office Fit-Out, CAT A vs CAT B vs CAT A+ guide.

FAQs